Dividend Champions: Will 2012 Be Another Blockbuster Year for Dividends?

The stock market is going nowhere, and now is the time for dividend stocks.

That's according to an article in USA Today, arguing that dividends were the sole source of return for many stock investors in 2011.

"Given the stock market's disappointing performance last year and lackluster targets for 2012, investors are happy taking what they see as a safer bet," explains Matt Kranz.

"That craving for dependable, albeit not guaranteed, dividend income could continue, given that interest rates remain low."

Key facts

  • The 2.1% total return by the Standard & Poor's 500 last year was entirely due to the 2.1% dividend yield, says S&P Capital IQ. That's the highest contribution of dividends to investors' total return since 2008, when the stock market's 38.5% decline was partly offset by a 1.5% dividend.

  • Dividend paying stocks also outperformed stocks that didn't pay dividends. Stocks that paid a dividend gained 1.4% on average in 2011, vs. a 7.6% average loss for S&P 500 stocks that didn't pay a dividend, says S&P Capital IQ.

Business section: Investing ideas
Some investors believe it's more likely that companies will raise dividends than that economic growth will boost stock prices.

With that in mind, we wanted to crunch the data on a list of U.S. dividend champions -- companies that have raised their dividend payouts for 25+ consecutive years.

As a next step, we collected data on institutional money flows and identified five dividend champions that have seen significant institutional buying during the current quarter.

Big money managers have extensive resources to analyze investing ideas. So if they're buying a certain stock, it's worth paying close attention.

Do you agree with this bullish sentiment? Use this list as a starting point for your own analysis.

List sorted alphabetically. (Click here to access free, interactive tools to analyze these ideas.)

1. Federal Realty Investment Trust (NYS: FRT) : Operates as a real estate investment trust, which engages in the ownership, management, development, and redevelopment of retail and mixed-use properties. Net institutional purchases in the current quarter at 2.9M shares, which represents about 4.61% of the company's float of 62.89M shares.

2. HCP (NYS: HCP) : HCP, is an independent hybrid real estate investment trust. Net institutional purchases in the current quarter at 24.5M shares, which represents about 6.05% of the company's float of 405.19M shares.

3. Telephone & Data Systems (NYS: TDS) : Provides wireless and wireline telecommunications services in the United States. Net institutional purchases in the current quarter at 3.9M shares, which represents about 4.86% of the company's float of 80.26M shares.

4. Tennant Company (NYS: TNC) : Engages in the design, manufacture, and marketing cleaning solutions worldwide. Net institutional purchases in the current quarter at 792.5K shares, which represents about 4.28% of the company's float of 18.53M shares.

5. Washington Real Estate Investment Trust (NYS: WRE) : Washington Real Estate Investment Trust is an equity real estate investment trust (REIT). Net institutional purchases in the current quarter at 2.5M shares, which represents about 3.82% of the company's float of 65.48M shares

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

Kapitall's Eben Esterhuizen does not own any of the shares mentioned above.

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